The Traders Crucible

All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.

Arthur Schopenhauer

We’ve had so many people start to engage with MMT over the last few weeks.  But this blog post in the FT takes the cake:

“The point here is that based on the tax and spend model, paying a tax of $1 is the equivalent of seeing $1′s worth of tax canceled by the Fed as agent for the Treasury. The national debt goes down by $1.

Or as Cook puts it:

It’s exactly as though an obsolete $1 note is torn up or burnt. Or another way of looking at it is that it is what happens when a Frequent Flyer Mile is redeemed against a flight.

Because the money everyone is paid is nothing more than a tax credit, there’s only one problem. It comes about when the number of tax credits issued outnumbers the total redeemable wealth of the nation (i.e. the tangible common equity of the nation is fully eroded). That’s clearly not the case in the United States.”

This is very close to MMT, in the financial times, being openly discussed.   It’s also known as the fiscal theory of the price level for some people, but MMT is more elegant.  It talks about the tax credits directly.

I pointed out a few months ago that MMT was moving to violently opposed. Yves said that MMT might be moving past the first of Ghandi’s three stages.

I think we’re moving past those stages pretty quickly. This strange little article in the FT – posted by one of their brightest stars – is a sign that we’re moving beyond that, to the self-evident stage.